Cheap Accounting Blog

An accounting insight

What is Management Accounting?

Management accounting is an accounting function which is very different to that of financial accounting. We’ll start by explaining what we mean by financial accounting and then progress to explain the key components of management accounting and illustrate the difference to financial accounting.

Financial accounting predominantly focuses on the statutory reporting requirements and is concerned with the reporting of historic, actual financial information. This is typically in the form of the Annual Company Accounts and consists of a profit and loss account, a balance sheet and a cash flow statement.

Management accounting is quite different to financial accounting and is often more forward looking than financial accounting. Management accounting is often used for management decision making within an organisation whereas financial accounting is often undertaken to satisfy external legislative requirements and is used by external parties such as the tax man (HMRC).

The typical components of management accounting can be seen to be:
1. Planning and budgeting
2. Project decision making
3. Performance measurement
4. Forecasts
5. Variance analysis
6. Pricing and costing

Management accounting relies heavily on forecasts, trends and other future considerations to reach conclusions or to inform operational decisions.

Posted 6 days ago

LIBOR and the Interest Rate Swap Scandal: What is an Interest Rate Swap?

You may have read about the banker who was recently convicted for fraudulently manipulating LIBOR, which is the interest rate at which the banks lend to each other. This manipulation of the rate may have had a profound impact on interest rate swaps and the underlying calculation of interest payable.

What is an Interest Rate Swap?

An interest rate swap is an agreement to exchange interest rate cash flows based on a specified notional value (usually linked to the value of an outstanding loan) from a variable rate (or floating rate) to a fixed rate, or vice versa.

Interest rate deals are technically known as liquid financial derivative instruments and form part of a businesses interest rate risk mitigation strategy.

Swapping a variable rate for a fixed rate allows a company to hedge against, and reduce exposure to, any rise in interest rates. However, the opposite is generally required for a business to benefit from a fall in interest rates.

Nevertheless, swapping a variable rate for a fixed rate gives a company greater certainty over the interest liability across the term of the loan.

The duration of interest rate swaps is usually linked to the duration of an underlying loan. A typical interest rate swap agreement may last from 25 to 40 years.

Posted 2 weeks ago

What is accruals accounting?

Accruals accounting is another accounting term that is often used by accountants and this blog post has been written to describe what this term means.

Accruals accounting is basically a system of accounting based upon the accruals principles. Those principles being the recognition or recording of revenue when earned rather than received in cash. As well as, the recognition or recording of expenses when incurred rather than paid in cash. This results in the total of revenues and expenses being shown within the annual company accounts regardless of whether or not cash was actually received or paid out during the period.

Accruals can be defined as accounting adjustments for:

1. Revenues that have been earned but are not yet recorded in the accounts.

2. Expenses that have been incurred but are not yet recorded in the accounts.

Accruals are added to existing balances to ensure that the financial statements, or company accounts, reflect these amounts.

In summary, this accounting method measures the performance and position of a company by recognising economic events regardless of when cash transactions occur.

Posted 2 weeks ago

What is a Trial Balance?

A trial balance is something often referred to by accountants and here at www.CheaperAccountant.co.uk we are no different. Our accountants can be found guilty of using the same terminology on more than one occasion. This blog post will explain what a trial balance is so that you’re more informed the next time your accountant refers to this.

A trial balance is in simple terms a list of all general ledger accounts (both profit and loss account and balance sheet related) operated by the company. The list will describe the nature of the ledger account (such as sales, wages, cash at bank, debtors, creditors) alongside the associated monetary balance. This monetary balance will be either a debit (assets and expenditure) or a credit (liabilities and revenue).

The trial balance is the first step towards preparing a companies profit and loss account and balance sheet. The upper section often contains the profit and loss account items and the lower section the balance sheet items, although this can be shown in reverse.

The trial balance gets its name from the purpose of this statement. A trial balance is prepared to prove that all debits and credits do in fact balance. This also effectively proves that the primary statements (profit and loss and balance sheet) are in fact correctly balanced. The trial balance is an important element of double entry book keeping.

You will find that a trial balance is generally completed annually when the annual company accounts are prepared. Larger companies do prepare trial balances on a more regular basis for monthly financial reporting to the board of directors.

Posted 2 weeks ago

2016 Interest Rates Rise: a ticking time-bomb?

It has been widely publicised recently in the British media that the Bank of England is likely to increase interest rates at the beginning of 2016. This is due to continued growth and strength within the UK economy, with overall GDP around the pre-recession levels.

What does this mean for you and I?

Due to the high levels of debt apparent within the UK this article views the rate rise from the predictive of a mortgage holder. Given the steady rise in house prices and relatively recent times it may be fair to assume that a large number of people are mortgage holders rather 100% equity homeowners. This is certainly more accurate for the younger workers who have fairly recently stepped onto the property ladder.

Having said that we do acknowledge that there may be a gain for savers from an increase in interest rates, provided that this increase is passed in into savings products offered by the banks.

Impact on mortgage holders.

Let’s take the example of an individual with a repayment mortgage of £100,000 over a 25 year period. With a current interest rate of 3% represents will be £474 a month. If the base interest rate was to increase by 0.5% and the interest rate payable on the mortgage increases alongside this to 3.5%, the new monthly repayment amount would be £501. This increase doesn’t seem too bad on face value and £27 a month is likely to be absorbed by a typical mortgage holder’s

However, let’s consider an increase of 1.5% which takes the new mortgage rate to 4.5%. Here the monthly repayments would increase to £556, which is an increase of £82 or 17%. That is a reasonably significant increase and a mortgage holder who can only just afford the mortgage at the original rate of 3% may well struggle to meet this increase in repayments. This is what the media refer to as the time-bomb.

Our view is that some people may experience difficulties but on the whole most people are likely to manage with an interest rate increase better than what the media portrays. Some of this simply feels like headline grabbing!

Posted 3 weeks ago

What is an Intangible Asset? How do I account for one?

Here at www.CheaperAccountant.co.uk we often come across clients who operate via a limited company structure and then buy an Intangible Asset via the company. This poses a unique accounting treatment as an Intangible asset isn’t a frequent item purchased by businesses and is often a one off purchase that affects the company balance sheet as well as profit and loss.

So what is an intangible asset?

An intangible asset is often referred to as a non-physical asset. This means that you can not in effect touch the asset. An intangible asset will also have a useful life of more than one year.

Examples of an intangible asset.

Typical examples of intangible assets could be items such as goodwill, a purchased brand name, or something as simple as a purchased client list.

How are intangible assets accounted for?

Intangible assets are accounted for as an asset on the company balance sheet and then depreciated or amortised over the useful life of the asset. A typical rate of depreciation could be 25% giving a useful life of four years.

The calculated depreciation expense becomes the expense recognised within the profit and loss account, rather than simply expensing the full purchase price.

Posted 4 weeks ago

Why so many authorisation codes?

When we take on a new client there are often a number of codes which are required to allow us to correctly submit the work we’ve completed on your behalf. This isn’t necessarily a bad thing as it allows both the client and accountant to establish a relationship with a mutual understanding whereby all submissions, etc are in fact authorised by the client.

We are asked on a regular basis what codes are needed and why, so here at www.Cheaperaccountant.co.uk we have decided to write this blog post explain each of the codes and what they relate to.

Companies House Company Number

This is simply your Limited Company’s registration number with Companies House. We need this number to look up filling dates as well as gaining information in company directors and the number of shares issued.

Companies House Authentication Code

This code is often revived when a limited company is incorporated. If you don’t have a copy of this code a reminder can be mailed to you by Companies House to the registered company address and your accountant will be able to help you with this.

The authentication code is needed by your accountant to allow him or her to submit your company accounts and annual return to Companies House on your behalf. The code effectively asks as your online signature with Companies House. Always ensure that you review documents prior to submission by your accountant.

Unique Tax Reference (UTR)

The UTR is needed by your accountant when submitting your accounts and corporation tax return to HMRC. The submissions cannot be completed without this code. The code is a unique code which identifies your company within the HMRC tax system.

Agent Authorisation Code

Before making submissions to HMRC your accountant will need to request agent clearance from HMRC. This was previously a paper exercise but most accountants now complete this online. This involves a code being posted to you from HMRC which you need to provide to your accountant who will then enter the code online to prove that you have agreed for the accountant to act on your behalf.

A new code is needed for each HMRC tax, for example, PAYE, self assessment tax, corporation tax and VAT.

If you are in any doubt about the codes you need then speak to your accountant who will be able to clarify this for you.

Posted 5 weeks ago

Full Accounts and Abbreviated Accounts: What's the Difference?

Here at www.Cheaperaccountant.co.uk we are often asked if we prepare full or abbreviated accounts on behalf of clients. The answer is that we prepare both. In reality both are very useful and one is simply a subsection of the other. The two very much go hand in hand.

So what are full accounts?

Full company accounts comprise a profit and loss account, a balance sheet and detailed notes to the accounts. These are the essential elements of the full accounts.

In addition to this, full accounts will also include an accountant’s report and a director’s report. Both of which provide further important company details.

The company profit and loss statement is in practice a listing of the key categories of business income followed by a listing of the core categories of business expenditures. When income is totalled and subtracted from total expenditure the resulting figure is the company’s profit or loss for the reporting period.

The company balance sheet displays all categories of assets and liabilities as at the balance sheet date. The balance sheet date is the final day of the accounting period. The end result is to state the company’s net worth.

What are abbreviated accounts?

The abbreviated accounts are what tends to be submitted to Companies House. These are essentially a summarised version of the full accounts.

The abbreviated accounts include the company balance sheet and a reduced number of notes to the accounts. These do not include the profit and loss account.

Why prepare full accounts?

This is a fair question as only abbreviated accounts tend to be submitted to Companies House. However, only the full accounts display the profit and loss statement which is an important document for company directors and can aid decision making. Furthermore, the profit and loss statement is likely to be an essential document if you’re a company director applying for a mortgage.

Posted 6 weeks ago

What are Capital Allowances?

Capital allowances are annual allowances that allow certain items of capital expenditure to be offset against profits during the calculation of Corporation Tax. It is important to get this right when calculating tax due to be paid to HMRC and it’s also important not to miss this tax offset.

Annual Investment Allowance

This is a specific type of capital allowance that permits the cost of equipment or fixtures and fittings to be offset against company profits and in turn reducing corporation tax.

All companies can claim up to £500,000 each year for plant and machinery. This can include a laptop purchased for business use for example.

The benefit here is that 100% of the cost is taken as a qualifying expense within the year of purchase, rather than spreading the cost across the useful life of the equipment. Which means an instant reduction in tax for your company.

The allowance is due to be reduced to £25,000 with effect from 1 January 2016, so this should be taken into account when planning major equipment purchases.

Posted 7 weeks ago

Pound surges on the back of a weak Euro

The Pound is holding strong against the majors and has recently surged after the Greek vote and the impact this had on the Euro. The Pound is now registering rates which haven’t been seen for a number of years which makes pleasant reading for holiday goers this summer.

With GBP holding firm at 1.4 against the Euro considerable gains have been made when compared to lows of around 1.1 only a few years ago. This means that anyone exchanging Pounds for Euro’s will receive considerably more than during the last eight years.

We all know that the Ashes kicks off this week and it’s also worthy to point out that the Pound is also riding high against the Australian Dollar. The Pound is current just shy of 2.1 dollars to the Pound and this is the highest it’s been since around 2007. We might start to hear the English fans chanting the reinvigorated exchange rate once again to the Aussies.

This renewed strength in the British currency partly relates to investors ditching the Euro, due to recent events in Greece, and purchasing the Pound, which is seen to be a safe haven alternative for the Euro.

This article was written by www.Cheaperaccountant.co.uk who offer accounting services at very low fees to clients across the UK.

Posted 8 weeks ago

Can I start my own UK Limited Company?

Here at CheaperAccountant.co.uk we are often asked what requirements need to be met to open a limited company and can anyone register and start their own limited company. These questions are very straight forward to answer and this blog post will give you all of the details you need to understand this topic.

Can anyone register a limited company?

The short answer is yes. Virtually anyone can open and register a limited company within the UK. Accountants call this company incorporation and anyone meeting the following criteria can incorporate a limited company within England and Wales and register themselves a company director:

1. You are 16 years of age or older;
2. You have not been disqualified from being a director.

It really is that simple!

Can a foreign resident from outside the UK register a UK Limited Company?

Yes you can. You do not need to be a UK resident to register a limited company within the UK.

Cheaper Accountant can complete your company formation for a very competitive fee of only £30. We will also manage all of your accountancy work at a low fee so that you can concentrate on running the business.

Posted 8 weeks ago

High Income Child Benefit Tax Charge Explained

Here at www.CheaperAccountant.co.uk we often complete self assessment tax returns for high earners and a number of these individuals fall within the grasps of the Child Benefit Tax Charge. This charge is effectively a method of reducing the child benefit received by higher earners.

For the purposes of this charge a high earner is seen to be anyone earning over £50,000. This is the income level at which the charge takes effect.

You will face the charge if the following applies to you:

1. You or your partner earn more than £50,000.
2. You or your partner receive child benefit income.

For the purpose of calculating the charge, the child living with you does not need to be your child.

Who pays the tax charge?

The highest earner within the relationship pays the charge, providing that person’s income exceeds £50,000.

This individual will be required to complete an annual self assessment tax return to pay this charge. The tax charge is calculated as 1% of the Child Benefit received for every £100 that the individual’s income is above £50,000.

Posted 8 weeks ago

Marriage Tax Allowance Explained

The new marriage tax allowance was introduced during April 2015 and can be used to reduce the tax of some married couples. The process is very different to what we’ve seen before, therefore, we thought a short blog on this topic would be useful for our clients and other readers of our blog.

Basic Principles

This essentially relates to couples where one individual is a basic rate tax payer and the other half of the couple does not pay tax at all (which suggestions this person could be a non-earning spouse). The new allowance operates by allowing the basic rate taxpayer to share part of the non tax paying partners personal allowance (tax free income allowance). The personal allowance is currently set at £10,600 for the 2015 tax year.

The scheme allows the transfer of an unused personal allowance from one partner to the other up to a maximum of £1,060. This only applies if the partner receiving the transferred personal allowance is a basic rate taxpayer. During the 2015 tax year this means earning £42,385 or less.

How much will it save?

The maximum saving is £212 which represents 20% of the maximum transfer value of £1,060.

Your actual saving will depend on how much of your partners personal allowance remains. If your partner utilises most of their personal allowance and has less than £1,060 remaining then the tax saving will be less than £212.

How do I register?

To register you will need to make a formal claim via HMRC. This will then result in your tax code being changed to incorporate the personal allowance transfer from your partner.

Contact www.Cheaperaccountant.co.uk if you need any further help or guidance on any personal and company taxation matters.

Posted 8 weeks ago

What does Grexit mean to you and I?

It has been very difficult to avoid the media coverage relating to the Greek conundrum and will she or won’t she repay her creditors. A lot of money has been dished out to Greece via loans that the country is struggling to meet repayments on. We all know that when repayments can’t be met default on the loan is often just around the corner.

There has been a lot of talk about the consequences of a Greek default and a subsequent exit from the Euro but what is the impact on all of this for the average person in UK. You’ve heard all about the falls in global stock markets and the potential impact that this may have on pension investments. This threat is very real, but for those who are not close to pension age the need for concern is far less. Haven’t we been here before during the credit crunch and the resulting global financial crises.

There is likely to be an impact on the value of the Pound and it’s often difficult to judge the full impact until after the event. Let’s take the fundamentals as a starting point; the British Pound is seen to be a safe haven alternative for investors selling and ditching the Euro. This suggests that the pound could well strengthen against other currencies such as the Euro. This means that your next holiday could infact cost you less.

The exit of Greece from the Eurozone could also lead to a leaner and more effective Eurozone economy. At the moment Greece could be seen as a lag on the Eurozone and a hindrance on growth. After the exit the Eurozone will be free from future burdens associated with Greece.

This is certainly a complex scenario and we’re not claiming to have addressed all of the issues but rather to start the debate on what this all means for the average person.

This blog was brought to you by www.Cheaperaccountant.co.uk who provide affordable accounting to small businesses across the UK.

Posted 9 weeks ago

Tax on Turnover? Surely not!

The fiscal reporting results are starting to feed through into the media from a number of the larger multinational companies who operate within the UK. Again the media is highlighting the amount of tax such companies pay in the UK and often make reference to UK sales or turnover figures. Does this paint the right picture? Does annual sales income drive the amount of Corporation Tax due?

The first thing that we need to remember here is that corporation tax is levied on profit only. A large turnover does not necessarily equate to a large profit. There’s often a considerable cost relating to achieving high levels of income.

So why does the media pay so much attention to this issue and place so much emphasis on sales income? I guess the focus on income is emotive to some extent as it does clearly demonstrate the size of operations within the UK and we all know that the likes of Amazon, Google and Starbucks clearly make a profit within the UK alone.

So what is the real issue here? Each of the companies named above have a reputation for using legal tax loopholes to reduce their taxable profits. Methods such as allocating a proportion of US head office costs to the UK operation allows multinationals to claim an expense that was incurred outside of the UK by creating a sometimes dubious link to the UK.

It is such methods that drive the media coverage as profits are effectively moved to lower tax countries. This is a legitimate reason, I guess, for public concern as another country benefits at the expense of the UK.

Cheaper Accountant is an online accountant providing very affordable fees to clients nationwide.

Posted 9 weeks ago

Tax Avoidance vs Tax Evasion

Tax evasion had been well publicised recently within the media but not everyone understands the difference between tax avoidance and tax evasion. This blog article will explain exactly what both mean and the implications for you.

The difference essentially relates to what you are permitted to do to reduce your tax bill (tax avoidance) and what you are not permitted to do to reduce your tax bill (tax evasion).

Tax avoidance, even though it may not sound it, is completely legal and simply involves taking legitimate steps to reduce your tax bill. This could be by receiving dividends from a limited company rather than a salary. Or putting cash savings into a tax free ISA rather than an ordinary savings account.

Tax evasion is different and this is completely illegal. This is where you commit a deliberate act to deceive the taxman. This could be not declaring income or under declaring income. In fact, prison sentences have been handed to EBay traders who have failed to declare trading income.

Other forms of evasion could be not completing your tax return it hiding taxable assets. If you’re caught you could face up to 10 years in prison.

If you need any further assistance with Abby taxation matters we recommend that you consult an accountant. Cheaper Accountant provides accounting services to small businesses across the UK and can assist you with all taxation matters.

Posted 10 weeks ago

An introduction to Cheaper Accountant.

Posted 10 weeks ago

Is cost of clothing a tax reducing business expense?

The cost of clothing appears within the business expenses of some of our clients from time to time. Consideration needs to be given to whether or not this expense is tax deductible, or in other words, does this expenditure lead to a reduction in taxable company profits.

HMRC only generally allow specific clothing that is essentially needed during the course of employment or conducting business. The following examples fall within this acceptance criteria:

1. Uniforms
2. Costumes
3. Protective clothing

The real test here is the “wholly and exclusively” test. It is fairly straight forward to argue that the clothing listed above is for work purposes only and not purchased for private use.

The main thing to consider when claiming an expense for clothing is that the clothing does not have any private benefit.

If you’re in any doubt about business expenses in general then feel free to consult one of our cheap accountants.

Posted 10 weeks ago

Reduce my Income Tax: Two Simple Strategies

We are often asked about income tax and a popular question from our clients is in relation to minimising income tax. We understand why this question is often asked as no-one wants to overpay tax.

This blog post will explain two strategies that can be used to reduce your personal income tax. Each taxpayer has different circumstances but the two options can be used by a large number of people and suit a number of circumstances.

Option One

This option involves the receipt of salary and dividends from a limited company. This is the single most effective method of reducing the income tax you will pay and can lead to significant savings in income tax.

This option is suitable for a wide range of people such as contractors and most people who trade through their own business. Registering and operating a limited company allows you to receive a small salary from the company and larger dividend income from the company.

This is a very tax efficient method of receiving income mainly due to reduced National Insurance contributions. You can even reduce your National Insurance contributions to nil by receiving a salary below the NI threshold and then extracting income from the company via dividends which do not attract NI contributions.

You need to remember that your limited company will pay corporation tax on company profits after the deduction of your salary. This will be at a rate of 20%. However, due to the payment of corporation tax dividends do not attract income tax if you’re a basic rate taxpayer.

Option Two

We realise that option one can’t be used by everyone. Those individuals who are employed in the general sense cannot simply opt to receive their salary through a limited company so we have another option that can be used by a large number of employees.

The second option relates to claiming the cost of professional memberships as an allowable tax deduction. There are a large number of people who pay fees to members of a professional body and in general terms these payments can be used to reduce your income tax.

This method can be utilised in one of two ways. You can record the expense on your tax return and claim the income tax reduction via the tax return. Or if you’re not required to complete a tax return you can simply write to your local tax office and ask them to adjust your personal tax code to incorporate the fee paid to your professional body.

One of our cheap London accountants can help you with a range of tax strategies. So take a look at our website and request a free quote today.

Posted 11 weeks ago

What is Corporation Tax?

Corporation tax is a business tax levied on the profits generated by limited companies registered within the UK. This isn’t a tax that applies to large businesses only and applies to all limited companies regardless of size.

What is Corporation Tax charged on?

The following provides a list of limited company outcomes that give rise to a corporation tax charge:

1. Trading profits
2. Investment returns
3. Gains on the sale of assets (chargeable gains)

If the limited company is based in the UK it will be charged corporation tax on profits derived within the UK and from overseas.

However, if the company is based overseas with an office or branch in the UK it will be charged corporation tax on profits generated within the UK only.

You must register your limited company for corporation tax within the first three months following the commencement of trading. The company may be issued a fine if this date is missed.

The current corporation tax rate is 20%.

If you need any further details relating to corporation tax then email one of our cheaper accountants.

Posted 12 weeks ago

Fake HMRC Emails Doing the Rounds Again!

The new tax year has begun in earnest and we have already been made aware of fake HMRC emails that have been circulated to some of our clients. This blog post will tell you how to spot a fake email and what you need to look out for.

The telling signs of how to spot a fake HMRC email:
1. HMRC will never ask you for your personal or company bank details.
2. HMRC will never ask you for any personal login details to your bank.
3. HMRC will never ask you for any personal login details to your HMRC online accounts.
4. HMRC will never disclose a refund value within an email … this is a tactic used by the fraudster to draw you in.

The one thing that you should always remember is: HMRC do not issue refund emails to anyone relating to overpaid income tax or corporation tax.

If you receive such an email and you’re interested to know where you stand in relation to your tax affairs you should always contact your accountant in the first instance. Our cheaper accountants can advise you further if you do receive an email like this.

Posted 12 weeks ago

How do I pay myself as a Sole Trader?

Operating as a Sole Trader is often referred to as the simplest business structure and this is probably true. A sole trader can start up business very easily and quickly without jumping through a lot of red tape. A sole trader can virtually start up and go.

We are often asked about salary payments and drawings made by a sole trader and how these are transacted. This blog post will help to explain this to all sole traders operating within the UK.

A sole trader is very different to a limited company and the first thing that all sole traders should remember is that the surplus of income over expenditure belongs to you and this is effectively your income. There is no option to leave retained earnings within the company, as you may with a limited company, as when you operate as a sole trader the company is you and there is no separate company identity.

So in simple terms sole trader profits = business owner income. There is no need to perform any further transactions as the income is yours.

If you need further advice on your company structure then email a cheap accountant for further details.

Posted 12 weeks ago

Limited Company Director: Self Assessment Tax Return Compulsory?

One of the first questions our cheap accountants are asked when a client registers and operates a Limited Company is what about my Self Assessment Tax Return? There is often an automatic assumption that being a Director of a limited company means that a self assessment tax return must be completed and submitted to HMRC.

The above is not always the case and more often than not a self assessment tax return is not required to be submitted. This is for the following reasons:

1. PAYE income is taxed at source during the PAYE process
2. A limited company director is not considered to be self employed for income tax purposes
3. A limited company director is an employee of the limited company
4. Many limited company directors can actually have fairly simple tax matters that do not mandate the submission of a self assessment tax return

Despite the above the following request can override this:

If HMRC request a self assessment tax return to be completed and submitted then there is little choice but to complete and submit the return.

There are a number of reasons why a self assessment tax return must be submitted and this includes:

1. You were genuinely self employed as a sole trader
2. You received £2,500 or more in untaxed income
3. You received interest income of £10,000 or more
4. You generated capital gains
5. You received other taxable benefits from your limited company whilst acting as a director
6. Your income exceeded £50,000 and you or your partner received child benefit
7. Your income exceeded £100,000

If you’re in any doubt about your tax affairs then send an email to info@cheaperaccountant.co.uk for expert advice on all tax matters.

Posted 12 weeks ago

When do I need to register for VAT?

If you operate a limited company or a sole trader business you should be aware of what triggers the requirement to register for VAT.

This is important as once a business meets the obligation to register for VAT, 20% VAT must be added to the prices charged by the company. If a company owner fails to do this on time then the prices are likely to be assumed as being VAT inclusive which can cause a serious dent in company profits.

You must register for VAT and charge VAT to your customers at a rate of 20% when:

1. Your VAT taxable turnover is above £82,000 (2015-16 threshold)

2. You expect your turnover to exceed the threshold within the next 30 days

You can register for VAT on a voluntary basis, regardless of your level of turnover, and this is sometimes a wise tax strategy. More specifically a business can achieve gains from utilising the VAT Flat Rate Scheme, which we explained in more detail in an earlier blog post.

Non allowable VAT registration avoidance strategies

HRMC does not allow the following in an attempt to avoid VAT registration and is very likely to come down heavy on offenders:

1. Splitting the business into two or more companies to avoid reaching the threshold

2. Excluding overseas sales from turnover

If you need any further help or advice with your VAT matters then contact one of our accountants directly from our cheap accounting service.

Posted 12 weeks ago

Home Office Costs: Proportional Basis

During an earlier blog posting we introduced the flat rates available to those who work from home but there is another method available. This alternative method calculates the cost of operating a home office through a proportional calculation.

If you work from home during the running of your limited company or sole trader business you will be able to claim the costs of the following as a tax deductible expense:

1. Heating costs
2. Electricity charges
3. Council Tax
4. Mortgage interest
5. Rent
6. Internet charges
7. Telephone charges (this could mobile and/or land line)

HMRC asks that you use a reasonable method for allocating such costs to result in a total charge for your home office.

Reasonable Method - Proportional Basis

An acceptable and reasonable method of allocating total household costs such as those listed above is to divide the total cost by the number of rooms used for business purposes or to divide the total cost by the number of hours spent working at home.

For example, if you run your business from one room within a three bedroom property then you can simply divide the total costs by three. A rent bill of £300 would in this example result in a business expense of £100 (£300 divided by 3).

If you have any further questions about home office costs and how these can be used to reduce profits and in turn reduce your tax bill email one of our accountants at cheaper accounting.

Posted 13 weeks ago

Who are the typical clients of a Cheaper Accountant?

We have been operating under the trading name of Cheaper Accountant and from the website www.cheaperaccountant.co.uk for a number of years now and we have provided a highly valued and affordable accounting service to all of our clients over this period. We have a diverse range of clients from around the UK who operate within a number of industries.

The typical Cheaper Accountant client is:
1. Operates a small business (turnover under £750,000) within the UK
2. Online sales
3. High street store owner
4. Taxi company owner
5. Cleaning company owner
6. Construction company
7. Printed media
8. Sale of apps
9. Financial advisor
10. IT contractors
11. Telecommunications contractors
12. Finance contractors
13. Professional services
14. Website design
15. Furniture sales
17. Video productions
18. Manufacturing
19. Legal services
20. Tattoo parlour
21. Logistics operators
22. SEO companies
23. International clients
24. Children’s entertainment
25. Tool hire

We work with a large variety of companies and we have the experience that small businesses need. So regardless of what your business does or sells you can rely on us for all of your accounting needs.

Posted 13 weeks ago

Free Accounting Software: Why we love Wave Accounting

We are genuine fans of the online accounting software provided by Wave and we have decided to share our enthusiasm and explain why we love Wave Accounting.

The Wave Accounting software is our accounting software of choice and this is the software that we recommend to our clients as we believe that the software is unique and the company behind the software is a great match for Cheaper Accountant.

So what is Wave Accounting?

Wave Accounting is a cloud based online accounting software created for small businesses and is provided completely free of charge. Wave places discreet adverts on its website rather than charging subscription fees like other online accounting software providers.

Benefits of using Wave Accounting:
1. Free of charge forever
2. Ideal for small businesses
3. Perfect for use in the UK
4. Easy access for your accountant
5. Seamless upload from business bank account
6. Simply exceptional innovation
7. Excellent free iPhone apps such as the invoice creation app
8. Reliable user support
9. Simple to use and highly effective
10. Outstanding user reviews

So if you’re considering using accountancy software for your company bookkeeping activities take a look at www.waveapps.com

Posted 13 weeks ago
Posted 13 weeks ago
Posted 13 weeks ago

When am I considered to be Self Employed?

Here at cheaper accountant we often find clients can get a little confused about the real meaning of being self employed and what this means in relation to income tax.

We have completed self assessment tax returns for clients and made corrections to returns already started by clients due to this confusion.

From our experience limited company directors often put themselves within the self employed category but this isn’t necessarily correct when it comes to income tax.

For income tax purposes, a limited company director (this can be the single shareholder or owner) who receives salary and dividend payments from a limited company under his or her control is considered to be an employee of the limited company as well as a shareholder in the limited company. This means that the employment pages of the self assessment tax return need to be completed.

A sole trader who operates outside of a limited company is generally classed to be self employed from an income tax perspective. This is what we tend to mean when we reference being self employed. In this case it is correct to complete the self employment pages of the self assessment tax return.

It is very important get this distinction correct as you could end up overpaying income tax and national insurance contributions if a mistake is made.

Posted 14 weeks ago

What is a Qualified UK Accountant?

The accountant that completes your accountancy work when you accept a quote from Cheaper Accountant will be a fully qualified UK accountant but what does this actually mean to you and your business?

We define a Qualified UK Accountant as:

1. A full member of a UK accountancy body.

2. A person who has passed all of their professional accountancy exams.

3. A person who has obtained the practical experience required to join a UK accountancy body.

How this benefits you and your company:

1. The experience and expertise you need.

2. A proven ability to complete the accountancy work you need to be completed.

3. A proven ability to give you and your business the advice and guidance you need.

4. A regulated expert.

5. Trust, confidence and piece of mind.

Interested to know more about who we are and what we have to offer? Then take a look at our website: CheaperAccountant.co.uk

Posted 14 weeks ago

Dividend Tax Credits Explained

Here at Cheaper Accountant we are often asked about the dividend tax credit and what it is and what it means. So we decided to write a blog post to demystify the dividend tax credit.

All dividend payments receive a tax credit equal to 10%. This effectively equates to a 10% reduction in tax on dividends. This means that basic rate tax payers pay 0% income tax on dividend income.

The tax credit applies to any individual who receives dividend income from the shares they hold in a company.

It really is as simple as that. We won’t go into how to create a dividend voucher and how to calculate the dividend tax credit as that really is another topic in itself. We also believe that this is best left to your accountant. If you’re looking for Cheaper Accounting then check out our website and send us an email for a free quote.

Posted 14 weeks ago
Posted 15 weeks ago

Does the Minimum Wage Apply to Company Directors?

The UK National Minimum Wage is set to increase by £0.20 an hour from an hourly rate of £6.50 to £6.70 during October 2015.

With this in mind it is quite timely to address the question of the Minimum Wage in relation to Company Directors.

We are often asked how the minimum wage regulations affect limited company directors and we answer this question now.

The following people are exempt from the application of the minimum wage:

1. Company Directors
2. Self employed individuals running their own business

Therefore the simple answer is: company directors and those who are self employed don’t need to consider the minimum wage when paying themselves.

If you need any further accounting advice or accountancy work needing to be completed then contact CheaperAccountant.co.uk for an affordable accountant.

Posted 15 weeks ago
Posted 15 weeks ago

How to Switch Accountant: A Simple Process

It really is very easy and straightforward to switch your accountant and we can even handle this for you. Here at CheaperAccountant.co.uk we have assisted a large number of clients in changing their accountant and we make it an easy and simple process for everyone.

We do the following:
1. Send an email to your existing accountant requesting your company and personal details, such as HMRC and Companies House codes as well as copies of recent accounts and returns.

Then we’re ready to go and it really is as simple as that!

Furthermore, if your existing accountant is a member of a professional accounting body they are expected to comply with this request within a reasonable period of time.

What we need from you:
1. We may need you to email your existing accountant and authorise them to release your information to us.

We couldn’t make the processing any easier than that!

So why not switch today and save on your accountancy fees.

Posted 15 weeks ago

Limited Company Registered Address Service

We are often asked if we provide an affordable registered address service and the answer is no we don’t but we can recommend a UK service provider who does. Our recommended provider offers this service for an annual fee of only £29.99 and we couldn’t do better than that!

CheaperAccountant.co.uk believes in sticking to providing affordable and efficient accountancy services to small businesses across the UK. We leave the handling of mail to the mail guys and we strongly recommend that you take a look at CityAddress.co.uk for your registered office address needs.

This is a very reputable company who can be relied on to handle your mail and to provide you with a respectable company address. In addition to this, we haven’t found any providers who offer this service for less within the UK.

Cheaper Accountant is always working hard to deliver affordable services and establish value for money relationships for the benefit of our clients. We will provide you and your business with a cheaper accountancy service and City Address will provide you with a cheaper registered address.

Posted 15 weeks ago

Limited Company Fines: What could I be charged?

If you are a limited company director you should be aware of what documents need to submitted to Companies House and HMRC and when rash year to avoid being fined.

Our previous blog post covered the details on what needs to be submitted and by when so we won’t repeat those details here.

There are a couple of avenues where fines can be generated in relation to the late submission of key returns for your limited company. These are discussed in detail below.

Companies House - Company Accounts

You will receive a late submission fine from Companies House if your accounts are received late by only one day. The fine levied escalates as per the following table:

Days Late | Penalty
Up to one month | £150
Between one month and three months | £375
Between three months and six months | £750
More than six months | £1,500

The good news is that there is no fine levied for the late submission of an annual return to Companies House.

HMRC - Company Tax Return

HMRC also levy fines for late company tax returns and this can also apply when the return is late by one day only. See the table below:

Days Late | Penalty
1 day late | £100
3 months late | a further £100
6 months late | 10% of unpaid tax
12 months late | a further 10% of unpaid tax

An accountant from CheaperAccountant.co.uk can help you avoid fees and to submit your accounts and other returns on time.

Posted 16 weeks ago

I've started my Limited Company - What Next?

Registering and starting your own limited company is the first step towards operating a successful business. Post incorporation, there are a number of documents which need to be submitted each year to meet your legal duties. This short blog will give a quick run down of what needs to submitted to who and by when.

1. Annual Return
This is a return which contains information about company shareholders and the number of shares issued as well a brief description of what the company does.

This is not the annual company accounts.

An Annual Return must be submitted to Companies House 12 months after incorporation and on each subsequent anniversary.

2. Annual Company Accounts
The Annual Company Accounts comprises a Profit and Loss Account and Balance Sheet and must be submitted to Companies House within approximately nine months following the end of the companies accounting period. The accounting period generally approximates to the subsequent 12 months post incorporation.

A fine is levied by Companies House if the accounts are submitted late.

3. Annual Corporation Tax Return (CT600)
The Annual Corporation Tax Return accompanies the submission of the accounts to HMRC and details the calculations behind the amount of Corporation Tax payable by a limited company.

This is required to be submitted within the 12 months following the end of the company’s accounting period.

One of our accountants can complete all of this work for you and the starting price is only £100 for your annual accounts and submissions (see 2 and 3 above). Contact CheaperAccountant.co.uk today for a free quote.

Posted 16 weeks ago

What is an Online Accountant?

Cheaper Accountant can be categorised under the banner of an online accountant, but what is an online accountant and what does it mean to you and your business?

The typical characteristics of an online accountant are as follows:

1. Operate a website rather than a traditional high street premises
2. Provide quotes via email or other electronic methods
3. Active on social media
4. Conduct business communications via email and other electronic methods
5. A focus on online advertising and promotion
6. Responsive to your needs through the use faster, modern communication networks
7. Low cost due to the maximum use of modern technology
8. Complete all submissions to HMRC and Companies House online

What does this mean for you and your business?

1. A cheaper price for your accountancy work
2. A more personalised service
3. Quicker response times when addressing questions and queries
4. No expensive hourly rates or unexpected bills
5. A modern and efficient accountancy service

If you’re new to the concept of an online accountant then ask CheaperAccountant.co.uk for a free quote and feel free to ask any questions to one of our qualified UK accountants.

Posted 16 weeks ago

Cheaper Accountant: How do we keep our prices so low?

CheaperAccountant.co.uk was launched a number of years ago to provide a more affordable alternative to small businesses across the UK. We offer the same quality services that any other qualified accountant does in the UK but for a much reduced fee. In fact our prices are often found to be 75% less than our competitors.

Our mission is simple: to offer cheaper accountancy work to all small business nationwide. We firmly believe that it can be enough of a challenge to succeed in business without accountancy fees eating into your company profits.

We differentiate ourselves from a traditional accountant by:

1. Removing the expensive high street office
2. Removing the polite receptionist
3. Removing expensive newspaper based advertising
4. Removing expensive rents and rates

Instead we:

1. Offer a cost effective online accountancy service
2. Advertise for free through social media channels
3. Communicate to clients through electronic channels such as email
4. Operate a simple and cost effective website rather than an expensive high street store

So that is how we keep our prices so low compared to a traditional accountant.

The best part is that we completed the same exams, joined the same professional bodies and share the same professional standing and expertise as any other accountant. All we do differently is charge you less.

Posted 16 weeks ago
Posted 16 weeks ago

Benefits of the VAT Flat Rate Scheme

The Flat Rate Scheme is a simplified method for calculating the VAT due to HMRC. It reduces some the administration effort involved with calculating VAT due for payment when compared to the normal method of accounting for VAT received from customers less VAT incurred on business purchases.

The flat rate method simply applies a % to your business turnover to calculate the VAT due to HMRC. The best part is that you then retain the VAT income received which is over and above the payment to HMRC.

This can be a nice little windfall for a number of businesses. Especially when you charge VAT at 20% and then pay over only 10% to HMRC.

To join the scheme your VAT turnover must be less than £150,000 per annum.

The flat rate scheme is perfect for most contractors and effectively allows you to supplement your contract income.

We have helped a vast number of businesses with their VAT registration and quarterly VAT returns, so if this is something that interests you then contact CheaperAccountant.co.uk

Posted 16 weeks ago

Mileage Rates 2015 - Are You Claiming?

If you use your own vehicle for business you should take note of the following allowable expenses that can be used to reduce the amount of tax you pay.

The method for claiming the expense associated with the use of your own vehicle is simple. You need to record your business mileage each time you use the vehicle for business purposes and then multiply the total business mileage for the accounting year by the approved mileage rate.

The current HMRC approved mileage rates for cars and vans are as follows:

First 10,000 business miles - £0.45
Each business mile over 10,000 - £0.25

The mileage rates are fairly generous and incorporate an allowance for fuel and wear and tear of the vehicle.

The resulting expense is then fully claimable as a legitimate business expense.

Posted 17 weeks ago

Home Office Costs: Are You Aware of the Simplified Expenses Method?

If you work from home you may already be aware that you can claim the cost of doing so. However, are you aware of the Simplified Expenses Flat Rate method?

This method is simple and easy to use and significantly reduces the administrative burden of claiming home office costs and the associated documentation. This method removes the need to separate private and business use, which can often be quite difficult in practice.

The method allows you to calculate your allowable expenses through the use of a flat rate based on the number of hours you actually work from home each month.

The following table stipulates the allowable expense associated with each category of hours worked:

Hours worked Monthly Rate
25 to 50 £10
51 to 100 £18
101 and more £26

Restrictions:
1. You can only use the Simplified Expenses Method if you work from home for 25 hours or more.

2. The flat rate doesn’t include telephone or internet expenses and these must be claimed by separating and removing any private use.

Posted 17 weeks ago

Spare room to rent? Make money tax free!

Do you have a spare room in your house that you could rent out to an individual? Well if you do the “rent a room scheme” could be highly beneficial to you.

The rent a room scheme is a HMRC approved tax incentive allowing would be landlords to rent a room within their main residence and to receive the rental income free of tax.

You can benefit from up to £4,250 tax free rental income per annum, which isn’t to be sniffed at. This is regardless of income earned from other sources such as income from employment.

You may be required to submit a self assessment tax return if you earn more than the threshold and then opt for the above income to be tax free. A Cheaper Accountant can certainly help you with this.

Posted 17 weeks ago
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Cheaper Accountant, simple and affordable fees >> Wave Accounting, FREE small business Accounting Software = The Perfect Partnership.

Posted 17 weeks ago
Posted 17 weeks ago

Benefits of operating a Limited Company

There are a number of benefits of registering and operating a limited company. Some of the main benefits and advantages are listed below:

1. Paying less tax - you may take home as much as 75% to 80% of contract income. All natures of business can benefit from paying a low salary and then extracting income via company dividends. These are substantial tax reductions when compared to operating as a self employed sole trader.

2. Limited liability - should something go wrong there is no risk to your personal assets. Only the limited company is liable for company liabilities, not you. Great protection for you.

3. Enhanced credibility - customers, clients and suppliers are often more confident dealing with a limited company due to a perceived enhanced professional image.

4. Sale of the business - a limited company provides a convenient exit route should you decide to build your business and then cash in from the sale of the company.

5. Potential investors - investors often put their money into a limited company rather than a sole trader. Equity shares in a limited company can be sold to potential investors.

These are genuine benefits that anyone who opens a limited company can benefit from.

All limited companies must submit accounts and company returns to Companies House and HMRC but that’s where we can help and we won’t charge you an arm and a leg for the privilege.

Here at CheaperAccountant.co.uk we can set up a limited company for you and complete all of your accountancy work for a low annual fee.

Posted 17 weeks ago
<p>Don’t pay an arm and a leg for your accountancy work. Speak to a <a href="http://www.cheaperaccountant.co.uk">Cheaper Accountant</a> instead!</p>

Don’t pay an arm and a leg for your accountancy work. Speak to a Cheaper Accountant instead!

Posted 17 weeks ago

Cheaper Accountant is a trading name of Tarpon Limited | Registered Company Number 08213447

Registered Office: Advantage Business Centre, 132-134 Great Ancoats Street, Manchester M4 6DE

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